Most people don’t think twice before writing a check to their child or grandchild. Then tax season rolls around, or the financial aid letter shows up smaller than expected, and suddenly that generous gesture comes with strings nobody warned them about. None of this is because the IRS is trying to trip people up. It’s because there are several legitimate ways to move money to the next generation tax-free, and most families only ever learn about one of them.

Here are seven, along with what each one is actually protecting you from.

1. Use the Annual Gift Tax Exclusion

This is the one almost everyone has heard of and almost nobody uses fully. In 2026, you can give $19,000 to any one person, child, grandchild, or otherwise, without filing a gift tax return. Married couples can combine their exclusions and give $38,000 per recipient by electing to split gifts.

It resets every year, and it’s per recipient, not per giver. So a couple with three grandchildren could hand out $114,000 total in 2026 without touching their lifetime exemption or filling out a single IRS form.

2. Pay Tuition or Medical Bills Directly

Here’s the one people tend to miss entirely. Pay a school or medical provider directly on someone else’s behalf, and it doesn’t count against the annual exclusion at all. No dollar cap. The only rule is that the money has to go straight to the institution, not through the child’s hands first.

This makes direct tuition payments one of the most useful tools on this list, and one of the most overlooked. You could pay $50,000 straight to a grandchild’s university and still hand them another $19,000 in cash that same year, all of it gift-tax free. Just remember this exclusion covers tuition itself, not room, board, books, or fees.

3. Contribute to a 529 College Savings Plan (and Consider Superfunding)

Money in a 529 grows tax-deferred, and withdrawals come out federal income tax free as long as they’re used for qualified education costs. Contributions count as gifts, but there’s a special election, often called superfunding, that lets you front-load five years’ worth of annual exclusions at once. That’s up to $95,000 per beneficiary, or $190,000 for a married couple, without dipping into your lifetime exemption. Making that election does mean filing a gift tax return, even though no actual tax will be owed.

Did you know? The average 529 plan balance reached roughly $34,084 by the end of 2025, and American families now hold more than $600 billion combined across 529 accounts.

4. Use a Custodial Account, Carefully

UTMA and UGMA accounts let you gift cash, stock, or other assets into something managed for the child until they reach the age of majority, usually 18 or 21 depending on the state. No cap beyond the standard annual exclusion, no special IRS filing to open one.

The tradeoff shows up later. Any investment income the account throws off counts as the child’s unearned income, and once that crosses the 2026 threshold of $2,700, the portion above it gets taxed at the parent’s marginal rate instead of the child’s, the mechanism known as the kiddie tax. Custodial accounts also weigh more heavily against financial aid than a 529 does, since they’re counted as the student’s own asset. Worth a conversation with an estate planning advisor before funding one of these.

5. Gift Through an Irrevocable Trust

For bigger transfers, a trust does something a direct gift simply can’t: it keeps you in control. You decide when the money gets distributed and how, instead of handing an 18-year-old a lump sum and hoping for the best. Trusts can also help protect assets from creditors, a messy divorce, or a few rough financial decisions in someone’s early twenties.

This route takes more legal and administrative work than anything else on this list, and it usually only makes sense as part of a bigger plan rather than a standalone gift. This is exactly where global advisory and estate planning services earn their keep, since the right trust structure depends heavily on the size of the estate and what the family is actually trying to accomplish. For ultra-high-net-worth families moving significant assets across generations, this is usually where the real planning conversation starts, not the annual exclusion.

6. Split Gifts With Your Spouse

If you’re married, you and your spouse can each give the full annual exclusion to the same person, which doubles what you can move tax-free. Even if the money technically comes from one spouse’s account, both of you can elect to treat it as if it came from each of you equally, a strategy called gift-splitting. Both spouses need to consent to the election and, in most cases, both need to sign Form 709 for that tax year.

It’s particularly useful for a larger one-time gift, help with a down payment, a wedding, something where a single $19,000 exclusion wouldn’t cover it.

7. Time Gifts Around the Kiddie Tax Threshold

Even a gift that’s structured perfectly can still cause a problem down the line if it starts generating too much investment income in the child’s name. Once a child’s unearned income crosses $2,700 in 2026, everything above that gets taxed at the parent’s marginal rate instead of the child’s. Spreading gifts across family members, leaning on tax-advantaged accounts like 529s, and keeping an eye on how much income a custodial account is producing each year can keep this from becoming an issue at all.

Comparing the 7 Gifting Methods

Bringing It Together

There’s no single right answer here. It depends on how much you’re giving, whether the goal is education or a first home or just general support, and how much say you want in how the money gets used down the road. Families with larger estates tend to do best when they treat gifting as one piece of a bigger wealth transfer strategy instead of a string of separate decisions made one gift at a time. And anything involving a trust, superfunding, or amounts near the lifetime exemption is worth a second set of eyes from a CPA or estate planning attorney before you file anything.

If you’d like help figuring out which of these fits your situation, our global advisors can walk through it with you, or you can reach out directly to get started.

Frequently Asked Questions

1. How much can I gift my child in 2026 without paying tax? Up to $19,000 per recipient without filing anything. Married couples combining exclusions can go to $38,000.

2. What happens if I gift more than $19,000 to one child? Nothing dramatic. You’ll need to file Form 709, and the excess chips away at your lifetime exemption of $15 million in 2026. Actual gift tax rarely comes due unless that entire exemption gets used up.

3. Is money I give my child taxable income to them? No, gifts themselves aren’t taxable income. But if that money gets invested and starts generating dividends or capital gains, that income can be taxable to the child, and it may run into the kiddie tax once it passes $2,700 for the year.

4. What’s the real difference between a 529 and a custodial account? A 529 offers tax-free growth for education costs and plays nicer with financial aid formulas. A custodial account is more flexible in what it can be used for, but there’s no special tax treatment and it counts as the child’s own asset on financial aid applications.

5. Can grandparents use their own separate gift tax exclusion? Yes. It’s per giver, per recipient. Grandparents get their own $19,000 per grandchild, completely separate from whatever the parents are giving.

6. Does paying tuition directly count as a taxable gift? No, as long as the payment goes straight to the school rather than through the student or their parents. Tuition only, though, not room and board or books.

7. What if I forget to file Form 709 when I should have? It can mean penalties and interest if the IRS later catches it. Best to file accurately and on time, typically by April 15 the year after the gift was made, the same deadline as your regular income tax return.

8. Can I gift stock instead of cash? You can, and it counts toward the same annual exclusion based on the stock’s fair market value on the day you gift it. One thing to keep in mind: the recipient inherits your original cost basis, which can affect what they owe in capital gains if they eventually sell.